In praise of small caps

AXA Investment Managers has said that small-cap equities have moved up the value chain, increasing their focus on innovation and the exposure to structural growth stories. It added: “These developments as well as a number of factors – including less analyst coverage and lower liquidity – contribute to significant price inefficiencies, which provides a good environment for active strategies.”

The comments came in a new research paper, “Small caps: from beta to alpha”, which looks at the case for small-cap stocks. It added: “A number of factors, including a lack of familiarity with small caps on the part of investors, less analyst coverage, higher volatility and lower liquidity, contribute to significant price inefficiencies, which provide a good environment for active strategies.”